Research and ratings house Lonsec has sought to end the sometimes contradictory labels used by superannuation funds and asset managers to describe their asset allocations.
Lonsec chief executive, Charlie Haynes said there had been a long-running debate on how certain asset types should be categorised with investment managers and superannuation funds having differences stances on which assets to include and what proportion of members’ funds to allocate.
“The challenge for advisers is that two super funds might offer a ‘balanced’ option, each with significantly different asset allocations leading to diverging retirement outcomes,” he said. “Failing to understand an investment option’s actual asset allocation can also mean there is a risk that the option does not meet the licensee’s policies and guidelines, resulting in potential non-compliance.”
“Super funds use labels like ‘growth’ or ‘defensive’ to characterise an investment option’s asset allocation, but often these don’t tell the full story,” Haynes said
“Understanding the underlying asset allocation, how it aligns to a client’s risk profile and how it compares to peers is essential for financial advisers who have a duty to act in their clients’ best interests.”
Haynes said that to overcome the issue, Lonsec had launched a Super Asset Allocation comparison tool powered by Lonsec’s stablemate, SuperRatings, which is intended to allow advisers to compare asset allocations of up to five fund options and benchmark them against Lonsec’s own strategic and dynamic asset allocations.
“It’s not our job to tell advisers which asset allocation is most suitable for their clients, but we can make sure they have access to all the information they need to make a fully informed recommendation,” he said.
